Gold ETF Buyers Return as Global Equities, Energy Fall

(Bloomberg) -- As a rout in energy prices spreads to global equities, investors are returning to gold to take cover.

Assets in the SPDR Gold Trust, the world’s largest bullion exchange-traded product, rose yesterday at the fastest pace since July. The holdings are up almost 1% in December, snapping four straight months of losses.

Almost $870 billion was wiped from the value of world equity markets yesterday as oil prices sank to a five year-low. The dollar fell for three straight days against a basket of 10 currencies. After gold slumped to a four-year low last month, prices are up almost 9%. Demand has increased for the metal as a store of value on signs that central banks in Europe and Asia will boost money supplies.

“The reversal in the equity market has created some volatility, and that’s translating into a little bit of fear and a bid for gold,” Charlie Bilello, the director of research who helps oversee $220 million of assets at New York-based Pension Partners LLC, said in a telephone interview. “An added bonus has been the weakness in the dollar. A combination of all this is pushing people toward gold.”

Assets in the SPDR fund, which counts billionaire John Paulson as its biggest holder, yesterday climbed 2.99 metric tons, or 0.4 percent, to 724.80 metric tons, the biggest increase since July 14. The holdings rose 2.7 tons the prior day.

On the Comex in New York, futures for February delivery were unchanged at $1,229.40 an ounce at 12:28 p.m. in Singapore. Prices fell to $1,130.40 on Nov. 7, the lowest since 2010. For the year, the metal gained 2.3% and is up 1.5% this quarter.

“Some short-term institutional buyers have returned to gold as prices have been resilient at current levels,” Tai Wong, the director of commodity products trading at BMO Capital Markets Corp. in New York, said in a telephone interview. “Stimulus measures announced in various countries are bringing some investors to gold.”